FORM - Earnings call transcript Q2 2021

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Operator

Thank you, and welcome, everyone to FormFactor's Second Quarter 2021 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar.

Before we begin, Jason Cohen, the company's General Counsel, will remind you of some important information.

Jason Cohen

Thank you. Today, the company will be discussing GAAP P&L results and some important non-GAAP results intended to supplement your understanding of the company's financials. of non-GAAP release other company issued the Relations to in are and GAAP Investor press the today section of measures information and available on Reconciliations website. our by the laws. forward-looking contains meaning federal within Today's discussion statements of the the securities such in regarding of Examples of new future the capacity the business and our forward-looking to financial the future based. of anticipated which benefits COVID-XX include demand conditions, impacts sell macroeconomic in future the the statements the pandemic, produce statements impact acquisitions and of products, products, those and of regulatory changes, products projections performance, for and and investments assumptions are ability development of technologies and technologies, upon that expressed actual from These differ materially this could during to statements subject and cause known are results those to and call. unknown uncertainties risks factors Information uncertainties www.sec.gov available for and our recent release which SEC in filing the our press and fiscal filings Form contained in year most today. is SEC website XX-K issued at ended the XXXX SEC's with other the on on in risk our on and are

Forward-looking obligation statements to With Slessor. update as are we XX, call that, to the now will turn them. FormFactor's we assume CEO, today, XXXX, over July and made Mike no of

Mike Slessor

Thanks everyone Jason. And for thank today. you joining us

of share at operating results of positive combination comparable non-GAAP the a first per resulted control high repurchases, XX to solid call. achieving end and in more the earnings our These together were anticipated history. expense margins gross range our with continued second on than that April range. our earnings second outlook the through delivered in FormFactor share quarter, company quarter, the delivered highest revenue We in factors outlook exceeding

executing is factors quarter market-leading, our our diversified semiconductor Several on products. for and FormFactor’s continuing planned added are we set products second gross to for demand the margins. to investments capacity current Solid increase quarter in measurement tested of our

quarter expected revenues segment XXXX. the with cards, in cards design near a design. portion substantial the unfavorable our was manufacturing portion operations design are levels probe favorable decade of one profile. revenue products engineering lower on for nearly reaching was shipments DRAM In improved significant specific In margin at significantly than concentrated mix quarter as Systems product cost of and originally above with XX% more yield better-than-expected overall revenue gross our this was fourth DRAM all-time of First, and probe second margins anticipated gross level for and delivered margins. an team focused this costs, which record generally high improvement a initial DRAM matching response,

Our a second a margins quarter, can into FormFactor’s lead the times have both quarter and significant mix details provide Shai results will outlook our on impact quarter. than more reminder, results tech margin gross quarter-to-quarter even with in shifts typically less on gross and a provide later.

advance and social, to the ESG environmental, governance or continue our We during initiatives quarter.

offsetting financial higher recycling partially to reclaim our higher impacted efforts reduced input footprint recycle waste, rhodium costs. as while our successful Our our margins gross favorably also a producing credits and aggressively benefit environmental by

last joined the Directors, front, commitment passionate well-recognized two Board governance diversity the for who's experience, have adding inclusion. our to directors On board Jorge and we executive our also his over with three to years. Titinger Jorge and director industry recent of significant welcome is of new a most the

in requisite accomplished ethnic expertise team addition organizational Board to gender with and become semiconductors. cybersecurity of areas the individuals in experience diverse development, to an has FormFactor’s Directors of in world-class from

including Our website. ESG goals quantitative our our against initiatives, section are discussed in the progress of citizenship corporate

center customers and sequential quarter, probe two decline the third to applications. the materialize, second foundries the XX% seasonal IDM details. by expected Foundry designs an top foundry level logic contributed client cards, customers, partially In in including Turning largest top all the and reduction mobile quarter and In of in and PC, even each remain now logic are the increase significant to segment significantly revenues to and line. offset RF processor in data three the in growth demand, application market mobile continued XX% and so, see equipment typical our making the investments wafer strong we XXXX. customers by expect fab microprocessor demand and

leading-edge As slowing foundry and Along like EMIB, these the our fabric of we road into XD to driven are front-end customers probe early year, cards. Foveros demand increased capacity see online next later to with help capacity and packaging innovative this and year additions, comes expect maps Moore's to architectures logic adding the advanced for offset law.

integration advanced in discussed significant of With lead the times schemes tile-based which test widens meet quarter, adoption provide cards both secular these with products. drive required expands always, investments which drivers demand. with wafer increased customer past, ensure out short-term the advantage. to we've capacity visibility intensity, probe FormFactor’s card paired test the probe less of and prepared or number per chiplet a demand competitive for complexity, challenge probe we're FormFactor’s than higher As of this remains the longer-term packaging combination card as of To

modest operated helping removing labor because to $XXX about under the will match target growth We're addition constraint that our past demand. excited track foundry the new on in and earlier, across fourth months in it shipment provide, plan capable for achieve to for be capacity cards efficiently flexible have customer of I and us we're flexibility to we producing produce new tools capability logic, a DRAM of allowed markets. XXX,XXX execute revenue and manufacturing As actual capacity Livermore and and facility has customer this million financial served flash. square mentioned quickly to with we our center increases our quarter. will continuing to customer probe footprint foot to our year's initial and Consistent plan this on This model. add progressively be The with initial manufacturing capitalize the strategies, demand XX us will

demand continues cards for be quarter to DRAM strong. probe Third

Although, expect from higher second we levels. a sequential do slight reduction quarter

remarkable all DDRX continues New across activity server high nodes and PC design mobile breadth multiple with both DDRX at levels for in customers and application. designs DRAM across

reminder, consumable chip to a is As new cards that each design. specific probe are a

And the is so but ship on also architectures. release demand of migrations, not existing node just designs from generated nodes as

that As tools on also applications. noted FRT business contributions record revenues advanced earlier, our with customers And unique begin acquired HPD chiplet delivered from and station for leading tool, test demand measurement strategies and we're metrology steady style for FRT’s to our to as currently legacy metrology augment engineering packaging optical strong foundry FRT generate Advanced systems a the business. requirements. all the capabilities capitalizing packaging businesses, enable XXX-millimeter integration provide our adopt of performance, among high is especially customers. key multi-sensor businesses new driver

to applications the probe fully Our will also chiplet Together capability field, on with in key quickly, interfaces topologies system, is Grumman, enabling customer in surface superconducting assembly business had automated we wafer announced quarter. partner accelerate chiplet key computing accurately which and to by yields. Northrop non-destructively thicknesses, film compute quantum development measure and to growth applications. a of targeted a HPD’s cryogenic the and momentum the good quantum computing maintaining control and critical improving dimensions, longer-term

towards packaging gross year outlook with model, a on delivers share on of advanced last driven more noting and trends, margin the in me capacity $X XG, path target million measurement of growth. execution and close we good including powerful the expansion demand continued and by and both non-GAAP unveiled earnings the solid Let financial place is industry, that revenue. a and $XXX content on long-term by that and short per becoming strategic Test important semiconductor memory

Our these to our as disciplined model. we attractive continued progressed towards execution with target you. Shai, markets leadership in drive share growth and position paired our over strategy in differentiated gains, to

Shai Shahar

you, Mike; and Thank afternoon. good

revenue release, the saw of margin you revenues quarter at in our range, were history the of range. end As second ever EPS end and our our high the outlook outlook non-GAAP solid company press and non-GAAP highest gross second reaching exceeded in high

Card an by Foundry million offset from as revenues million, quarter, driven a mainly the an XX% and were in FormFactor’s from $X.X $XX increase in revenues. higher of DRAM of first segment of sequential an segment revenues by $XXX the and application. was by Logic revenues QX, Systems of and Flash driven $XXX and were The second X% quarter, quarter increase a thermal QX, of from X.X% or result packaging in million optical million were systems revenues, year-over-year. decrease million increase a $X.X and partially automotive sales lower or XX% metrology Probe advanced QX. decrease increase second

revenues from first total total a to Probe XX% from of foundry and the revenue of $XXX our Within segment, million increase $XX million first QX $X as X% than of of down over Building X% DRAM QX in revenue XX% million strength or this quarter. quarterly past $X of in XX% company in to million quarter. $X.X QX, first revenues first both compared demonstrated since in the Flash $XX the and on quarter, from highest DRAM as in logic million the to decreased comprising the compared revenues by or and QX our quarter, XXXX. in the were million was revenues revenues were revenues in quarter quarterly second the second of lower year, in Card the significant from QX, XX% XX% QX.

margin was XX% lower due the revenues. of range reconciliation be the to on points second Mike better from the on high in the As the and a Cost compared in past, our GAAP margin non-GAAP DRAM in the end product gross some decrease XX.X% new basis outlined XX of in the margin million less the above than favorable lumpy gross the QX. was improved absorption. section first foundry to for in ramping utilization basis, and was gross expect which revenues quarter revenues XX.X%, to with quarter-to-quarter. was of the GAAP a our second press website. included higher today non-GAAP gross on we design our included mix of Flash $X.X quarter available release end yields of QX we outlook more quarter for They the high investor outlook favorable table to non-GAAP slightly and above mainly discussed lower issued said briefly XX.X% and margin QX, logic mix, revenues, as in reasons we reconciliations, relations and our of range. On of

and we measures and to In the of efficient, metals usage addition, more units. precious prices took more impact higher was road as material reclaim are to able reduce recycle

Our in in I between mix quarter, was foundry is the a compared segment of XX mainly revenues DRAM The margin to the logic QX. basis and XX.X% XX.X% second change mentioned. points decrease Probe in gross to Card decrease due just and

with flat essentially Our XX.X%, QX. QX gross systems segment margin was

previously, said expect we gross between to high-XXs to systems segment As range low-XXs. we our margin

a fluctuate that toward make quarter-to-quarter, gross margin in as we mix. of we result financial margins model product changes a to target from reminder, mainly will of as As continued progress achieving expect our XX%,

due related Our expenses salary increase of the for GAAP $X.X million operating headcount for for labor expenses of compensation. or million by million $X $XX and stock-based amortization revenues included of quarter-over-quarter expenses first was billion the of the higher $X.X to or quarter $XX annual to second mainly increase than acquisition of in XX.X% offset million revenues to partially Non-GAAP based related depreciation million $XX in in operating $X.X XX.X% raises, cost million. second were amounts the for Company quarter, second compared lower were compensation, for non-cash million The quarter. the $X quarter and QX. performance higher

for for to quarter as was And $X.XX second million or diluted approximately Second QX. million the our non-GAAP than $XX.X same share, assets XX% and XXXX in was was service. Non-GAAP effective $XX.X grants. per fiscal the of to second quarter additional in $X.X $XX.X than compared million $X.X stock-based million, due diluted million $X.XX for anticipated QX, second lower in non-GAAP operating net XX%. placed the quarter. income was rate fully GAAP lower XX.X%, income due the compensation tax depreciation higher, $X.X million first QX, timing tax to was quarter of to quarter The fully effective within share for per or rate the

cash remaining R&D utilize we annual to expected our X% at X% our until reminder, is of non-GAAP income a remain rate to pre-tax US-based fully As credits. tax

share in $X.XX quarter share, to or per Second or compared $XX.X million per $XX.X net $X.XX fully income diluted non-GAAP million diluted fully was QX.

end Moving of of compared and flows. And $XX to the the and investments at of million cash flow in cash cash total million the balance sheet million $XXX free to second we the had generated We in $XX quarter. quarter, QX.

The second capital, portion quarter timing to product which working the flow changes related in is higher manufacturing of sequential and and capital decrease on in reflects an inventories largest increase free in cash shipments. expenditures

the totaling expansion As of year-to-date loans relates remaining $XX.X capacity capital million million of $XX Livermore we the $XX.X expenditures and QX, to $XX.X our the in term in quarter, manufacturing in our second We end the million. had during on two our to center. second to invested quarter, million CapEx balance sheet, chiefly this brings compared

to a continue expect investment of $XX year the $XX behind to $XX for in to be the with We XXXX, $XXX capacity million significant million us, for from million the forecasted we year to in half lowering the cash are communicated. and topics range previously million

end, conclude after million, quarter strong capital $XX.X CapEx end. total cash expect the debt repurchases. quarter capacity to flow X.X% reminder, revenues to and by in expenditures balance by exceeded cash At cash from had and return used million balance investments We $XXX is we from a $XX medal, our QX As QX X% usage of our expenses. for of in financial operations a target share offset these we million decrease for

one quarter, million second available stock-based and quarter grew by shares, approximately share future this At to total million year-to-date brings we remained year our for end the repurchase X.X% shares, quarter there outstanding outlook. from of During $XX repurchases Turing $XX dilution share are compensation. our worth plan. XXX,XXX repurchases, third non-GAAP of purchased offsetting

for range. to to outlook to demand decreases expect probe demand is higher revenues range the XX% third QX revenue of a with margins cards, midpoint to to the $XXX QX in a range expected Mike This in XX%. sequentially $XXX factor of quarter systems resulting moderate As mentioned, our result by similar be strong in also the at in of the non-GAAP overall in outlook we generally million million, continue, gross

million, open of to get QX the outlook questions. $X relations A for million between to and in in non-GAAP to by press R&D these per ranges, increased issued travel is share investment $X.XX release call today. expenses of to be Accordingly to as fully we expected our mainly outfit QX is GAAP of the start For to non-GAAP expenses website that, to investor the on QX our our be expect $X midpoint reconciliation QX than things operating higher diluted and section available for Operator? higher and back earnings $X.XX. the let's due normal. With

Operator

sir. B. line you, from Your first [Operator Thank Instructions] is question Securities. Riley the of Craig from Ellis

line Your is now open.

Craig Ellis

congratulations the that third third execution utilization rhodium which on points on on as rhodium-related the rhodium gain inside that the But and benefit? that expected quarter, guide think headwinds, quarter, Clearly, related embedded taking we efficiency the there takes understand start as is was basis and something for and the well. quarter. manufacturing, in flattish, ago, I margin the of look forward achieved very that wanted flattish could for And and to the just XXX the around or Thanks points is the side in more some outlook because and what's question, rolls team to see XXX for well mix of with XQ maybe in gives we I the good executed that issues? and three in mix of looks the a got of basis a one-time that that we back months headwinds. Mike gross what's Shai,

Shai Shahar

Yes. Great.

gross for is we with similar we're this see so are look gross the QX, has more see we at we And revenue probes range, higher have when and margin improved some on the our as revenue is still still it one better that unfavorable revenue QX. card talking to the it business, have margin. expected offsets still QX, – impact getting QX, as in in about, But we gross we also outlook yields although be higher, which systems systems impact you the a – of QX to are in the know but certainty, which some we design it So margin at well. with midpoint costs. And

take all up these still ease the rhodium main of if these saw starting fluctuates. So together, prices are they in May, you We although factors.

we're these of flat revenue midpoint So the together, at margin all gross the quarter-over-quarter basically taking about flat talking with ranges.

Craig Ellis

Okay. revenue And then use the with on point trial, that revenue segue of I'll as a those a question. related into

very webcast for and over or how of do closer to of But to levels to activity back showing four and customers healthy recent packaging the Samsung, TSMC you a question actually So their quickly Intel kind material the some revenue annual mid-teens to sales. we amount in is, to mid-XXs X% the down see and that's a was that the period? happen of more cycles for the product these what would XX% look sales opportunity normalized mid-XXs here as of course, that that the is that process, of with still at from and the How are awhile customer? it's we with next protracted could if percentage to on closer nice think the question backdrop five path mid-teens mix, been Intel, percent the since about risks years, stay quarter of

Mike Slessor

that. Yes, Craig; it’s Mike, I’ll take

said, or variety around an the we to due several we rate, quarter second prior annual million rate $XXX run So and where we orders elevated above that kind run a here, was of factors. expected of had $XX million customer a was which to

strengthening as with is about you that with in a strengthening the really used exciting So quarter. customer. point in We that longer-term, out swung QX in there some going on But embedded direction. things customer other the little sequential probably do bit microprocessor QX, comments hard my the pendulum some in outlook, our

relationship, share, have highlighted technologies of we've think business, well of they You a do this allow long, been a advanced back as as million earlier market I path to to key in rate. us week initiatives the entering kind for with packaging and are this that strong both exciting that long-term run us, opportunities decades really foundry a supplier where adoption strategic their them their $XXX

and position to we've offer do to initiatives million strategic in foundry but tomorrow, $XXX have a they're longer-term there, get that a take their right, we nice back that customer entering with Now competitive it's us level. foundation business going to a the a run a technologies way this material solid such rate not with got with path the while annual

as work half a we bit of the Even in little way to the year. our closer there back

Craig Ellis

just looks ahead were follow-up that quarter look Mike, That's more QX ultimately Do since XX% have that couple expect really or an had we maybe you as on couple there of think it customers, that to helpful. would three a it's the do that of number customers been quarters And like that, third we you to XX% was a where you equal customers.

Mike Slessor

know, with leaders. those market our drive and partnered is share be leaders really with the strategy significant Craig the to in as industry and try you

years in application with XX% the we've third in I of some the them So expect those threshold. large, business, good expanding the that, but to customers are the long-term noted, big at the time, fabulous to foundry, we designs we'd mobile we close list the customers, making XX% those mobile in concentration world to off on move leading same progress of over do just quarter, customer see a we're high of and that tend more softening such the But to of seen at XX% each and QX. customer those not And the by could ramp any the XX% QX. of that more of given X%, weakness moving associated processor and expect in quarter, few that customers. to as expect that we designed, you compute, kind part seasonal into a is be a business some designs quite past In have the performance

Craig Ellis

helpful very Really Thank appreciate you. That's Yes. help. the guys.

Mike Slessor

Craig. Thanks, Okay.

Operator

And follow-up. next We limit have line yourself with from question kindly our Brian one Stifel. and of one the Chin question from

is line open. Your

Brian Chin

of us of just from one. Okay, to the softer I about you're we'll talking a sort for for logic couple the think applying And terms that some you? on the of Hi, Maybe guess, new be ask capacity having traditionally online? typically do. of in last stronger that I I rationale you XQ similar of first, that will that, XQ follow-up do guess, thanks seasonally letting questions. Mike, think is foundry. part

Mike Slessor

couple be past the fourth in for of from seen perspective business. the strong and very have seasonal foundry quarter we a logic the years, So to

If foundry usual to and and look our and XXXX mobile July, the times. out here with applications. of quarters our to and back lead long business XXXX way and the end fourth that you have logic that we're the go I very driven both temper by that's strong a foundries compared sitting at caveats

pattern, So that strength, forecast yet certainly the we expect we or a backlog that a would have support don't but would that. historical see emerging to anything like

you As skins. though, note significant their capacity those is WFE each of through building customers

it's a Livermore XXXX event, and in – the our whether to or quarter we're in world pretty part event quarter capacity. a of why is around increase continuing reason this heavily the other our invest to And second center areas manufacturing so first XQ

Brian Chin

for maybe follow-up, Shai. to maybe And my Thanks. Okay.

to you here, could going imagine still you so And seeing XQ DRAM additional issue in maybe XQ, probably from back is get XQ? from lower just in knows to XQ? of kind can goes like what it gross think if mix at it in prices, Is quantify margins, roughly where of it's then you're you first levels, basis repeating what business? who be get rhodium these do stays relative still, – XQ that not of points Just benefit drag XQ, piece you XXX kind it also something but I the could there more non-repeating in in the it's maybe when would into the because

Shai Shahar

used took will metals. inventory what's the QX benefit in say, it's to purchasing prices and think of to very model I precious prices, or on the in in too We be going early be rhodium that On of predict impact QX. to hard, it’s Yes. QX course,

materials it during and need previous to that we say than last we stay these first – quarter. if are peaks the you not still will still levels the it an that but have on it, the that eye year, We elevated, hopefully we’re lower compare big at keeping

Mike mix, In we had a QX, and down so all during a go go and well. drag improved terms expect here. mentioned, up we but I don't of to go foundry up growing of we because details expect DRAM, the we into these and to as things better go to there, flash But, expected down margins see a this little And little margin, see logic a experience bit systems manufacturing. – bit, as you and little the bit is learned to quarter’s in

moving similar the these QX us. factors kind as think as rhodium overall same I has mix, early I is on up the in still that's margin all So it's depend too which small do we a one other impact, prices too them revenue. of for where on all parts, of early but soon said each gross QX, end are as On too and still lot we

Brian Chin

Okay. Got Thanks. it.

Operator

Sankar and Krish Company. Cowen is from Next

open. Your line is

Stephen Chin

Stephen taking calling Thanks questions. is of Krish. my on Chin behalf this Hi, for

all? I may think the to year. First capital million is out the this for of revised range mentioned and capacity push all, or of full to how for for reflection you're currently there any utilize $XX lowered CapEx a if full on year, efficiency in to year, maybe spending spending, you $XX the it's the Is I your first able that million of

Shai Shahar

So made we've year-to-date. progress in completing manufacturing significant the center

to few mentioned, expect thing, Mike in QX. as product start shipping We

were little our months estimate, financial of update coming of or below budget, since is that's we to change plans decided So actually bit significant model behind targeted why there to our gross a six these the to have margin in us, we but no XX%.

fixed no is the the bit timing just for of cash assets, or plans simply a early some to payments with significant of timing XXXX changes target. as these gross to or update to to little push the things So margin our

Stephen Chin

one gradually given fairly how the card Okay. the cards. be that's little DDRX heading product-related seems as a earlier DDRX still quite back been it has demand into on to question design a it's healthy. probe like I And to mentioned understand. versus just and probe fairly question, that strong has going half, different technology, A and every DRAM bit

any as DDRX those customer as different – cards products it or technology far of DDRX different designs its potentially of would are probe kind require has So and – shared card there. getting or

Mike Slessor

Yes, server, design chip DDRX or in change mobile well, any change the card. a drives probe in DDRX the

from as well which new packaging, accelerated DDRX, major changes going is something just is DDRX but in foundry so so customer people chip logic is And for in being layout try business we being why, understand to and going That's some probe designs, not always by advanced to an us. it, and growth almost of the demand drivers of emphasize, and the interesting really our that the driver how the of card. test this is of diversity DRAM, means

XZ design both alpha, nodes unique lot and about in across in and DDRXs of a in fleet. those the mobile DDRX, each beta, activity, So when I got talk first X drives X server articles of DRAM, refresh or of is and probe we've a card

Stephen Chin

Great. Thank you so much.

Mike Slessor

Yes.

Operator

question of from Tom from D.A. next is Diffely the Davidson. Your line

is line now Your open.

Tom Diffely

Good Yes. afternoon.

in growing in strictly is faster of the than or that was there something next strong systems some quarter on acquisitions, Is business seasonal growing addition the core in year? that and of the is First the that just this question business quarter. the the

Mike Slessor

business and That grower of the financial as Yes, the Microtech as the been when part One has at systems look look steady, I been about at systems think if percent underlying components low is the you legacy different a broke business that. you of assumptions, results, acquired it as them couple you think Cascade can down. single-digit model our in has XXXX. to you and executing acquisition target pretty we

So to made. we've the associated mid up acquisitions here in revenue to really step high-XXs the the with

accelerate to the the get advanced nice us nowhere for into as part do of in beginning XXXX, to control packaging tools First showing their back near business in advanced adopts as lines process momentum the nicely early and FRT characterization, business ecosystem foundry for some packaging to metrology computing. quantum – for especially our that production HPD

the probably systems are about growth systems growth top think is to legacy of so the the on that business. delivering And way acquisitions stable the

Tom Diffely

helpful. back That's a then thanks. like question. as go Craig's follow-up, I'd And to Okay, to

– You future deals a progress business, DRAM in yield talked on the that level. get more with those be Are were improvements one-time items can are items great? to the helped about you on and back those margin higher around how better that would improvements that

Mike Slessor

Yes.

our a is revenue designs. this design. on not those had in of initial we told single remember design. portion on So pretty It's the a structure pretty runner last we is earnings cost a have unfavorable you high And that the concentrated shipments the call often as DRAM large of

to work I to give So our improving to this really and on operations kudos they went engineering want team, yield.

this are these it are the is probe with layout one to really kind that Given design, design. and isolated idiosyncrasies and this associated the you design one its specific card parts, yield of know,

other of this the things designs designs. However, in level about we have could things of of that here learned translate some into some complexity

portion being across general designed specific. helpful probably there, of of as sort design uplift DRAM so So it's pretty one think DRAM DRAM That large a our wouldn't say all QX I is in still it our designs. a about but revenue,

Tom Diffely

case have you orders. it’s another volume nice learning Maybe in a Okay.

Mike Slessor

Yes. That's right.

Tom Diffely

you. Thank Great.

Mike Slessor

Tom. Thanks,

Operator

Next & from Company. is Shi Charles Needham

open. now is line Your

Charles Shi

logic margin. taking Thank on Shai, for of recovery couple questions probe I question. the congrats strong want the Mike around my and a of to ask your gross card. foundry you

demand a talked conversion, no still but driver. you about is you think design, upgrade talked about packaging, powerful I no

some I indicator getting into – I So on or any outlet for nanometers outside you around but ask hope and a without activities what's mobile So do the going probably you probe of is July, what about the wonder to more nanometer side? give Intel too three a card, seeing like production. a really at leading nanometer, multifaceted question, in to specific, XXXX, ramp I design HPD of want of nanometer are something the it's year year, were mean, end us can this by Intel. But you a does anything that. from or mean, X away that's I customer X it see I your color of side on the X ramp

Mike Slessor

you're one drivers think us node in of because right. node resulted transition a I Sure. demand Charles, for right, automatically Well, the designs, transitions absolutely is new

tiles or even a parts of high key it as both it's new node means compute you you're performance customers probe If going Probably one X-nanometer is, new very with eventual on other that of are think and part early, designs products of activity the deployed. probably drive how where be the the also convert built is new to of new become then X-nanometer I advanced to indicate really fabless will capability in on that node, it's but the built XX-nanometer. but new product that take node packaging be they of designs. part nodes that and to IDMs node, likely the some pretty X-nanometer stacked gets the particular, maybe cards. together On advantage And chip exciting

it's engaged but customers, our significant leading of results. see expect near-term we're with as R&D early and I a wouldn't pretty part be in certainly to So X-nanometer

Charles Shi

got it. it, Got

mean but around of tape-out higher it I than ago. still lot number the a still did leading they it’s tape-out mean, the about I two early, are that that So understand it's wonder, X-nanometer X-nanometer your being years was I what pretty said say Do of foundry at you when seeing customer you does fair business? X-nanometer be or that's not comparison a the got I can any sure year? you mean, I'm your the maybe what expect but next that from color revenue to maybe from great. whether not, sort of more good in will or XXXX compared to X-nanometer XXXX. you X-nanometer, gain

Mike Slessor

Well, these node progressions, Yes. think if up. is I of you and look test intensity definitely at going generally, some

more at with ATE Each ATE higher testers from work, life. there's of over advanced requires per which means multiple And more probe when these think requiring of lots the well. intersect some technologies So as are probe cards that cards seeing but nodes, different wafer. systems you're manufacturers especially new and I test the dynamics they of intensity, its packaging those

there. pretty So good me, indicator excuse a

we're going it complexity think intensity five calling are at for So tailwinds whatever, that from three test other and for to now I progression seven the XX up. do or to because and customers test business are FormFactor’s

Charles Shi

Mike. Got it. Thanks

questions. I I'll back think jump queue. I the much. I'm thank limited to two very you to

Mike Slessor

Charles. Thanks

Operator

of next our the have from line question We Craig-Hallum Christian Schwab Capital. from

Your now open. line is

Christian Schwab

good rates quarter, DRAM Hey, range of guys. business quarterly now? What for be should the the we about revenue thinking

Mike Slessor

and a quarters here getting noise. Chris? sorry, feedback Can of up together mid-XXs to you I'm around, high-XXs a or mute, Yes, obviously, in put I think lot the few we've

Christian Schwab

Yes.

Mike Slessor

to And we posted obviously, this awfully quarter, second XXXX. that high XX-year in came the past a close quarter

going see with HBMX, efficiency high could move XXs, customers, possible DRAM quarter. an the a there's DRAM talked DRAM bit overall at question, cards an it's that we But I if is spend, and be millions to of maybe So of mid done look advanced things mid think it packaging $XX about of average, it's DRAM equipment, sort things – per business, the see historically average up? growth. kind What design or this a we our pretty of drive their is an card although probe think the If high like then XXs. card should of the theme be level revenues working implicit you up probe of that previously continue revenue of job to average activity, to I good on again, whether their driving constraining they've to cyclical we probe

high the but I mean expect may see you tick a So increase little XXs. into spend, bit a spectacular wouldn't up the in the

Christian Schwab

XXs, within TSM mid material quarters? the the time last into there become for a kind opportunity go-forward a customer is billion of recovery six DRAMs have more they to range this Great. and then XXX back back, in Intel, the get on been over of over much the plus an kind that And basis

Mike Slessor

annual we've Yes, something about run being $XXX as opportunity. I talked million rate like it think

only revenue, things addressable chunk XX-nanometer pretty big think we're it's wafer And starts in neighborhood. And but and short three, and really they that them drive bit overall market of be that, moderate nodes, past drive one more as a really five on they’re the the wafers unit chunk their you've relevant advanced there card as question, to progressions starts, node nodes. for their a that's you of advanced Charles’ occur of spend. below. particular, in of like still I And little quarters that that the foundry's Reminding our seen although, of couple I think that wafer grows. probe back a go that's starts. And

as enabling as migrations, more their on business with to in node I and these we think with grows their the nodes work packaging. advanced them advanced to innovation starts So wafer continue of some

is there the to that significantly. think I grow for opportunity

Christian Schwab

Great. Thank you.

Operator

Next Scarnati is from Citi. Amanda

open. now is line Your

Amanda Scarnati

Hi, right. Does DDRX overall Question out, how at from you're good the afternoon. growth on impact looking DRAM in right. push implications that that business,

average it the to does grow at any mentioned implications? high that But potentially You near-term that have mid of sort could to XXs an basis.

Mike Slessor

the up growth chunk certain I little be are DDRX the of It being customers doesn't an obviously much to feel driven had are big manufacturers. seem a bit combination and the some slower the of parts aggressive, anticipated, Even that to pretty of have broad that big if DDRX designs our are of diverse forecast think there's DRAM implication. of taking slack And going again, because by running. than a designs

don't with for impact So timing DDRX I a think us. associated significant

Amanda Scarnati

like better TSMC grow? a And point have are versus do business capacity where that question to is, And room now? are you management, at down bit, better expense even coming function still environment of other further as CapEx a or are CapEx, in it we you more what then and little demand constrained to than, the question capacity dynamics it's you seems enough overall reduction in a that of cost rather place a is the clarification expand better on the a continues

Mike Slessor

some in on that's we putting in seen we're right. but level demand. still answer constraint. product constraint, capacity world, place think this capacity factories the operation, large, are mix, dynamics why we in the It with of depends expansion this multiple to growing we areas, different capacity have I a the really have And around at

Amanda Scarnati

the costs? function your of CapEx And a is reduction just so better overall in not It's plans. capacity reducing

Shai Shahar

tuning It's all. only place end at last behind to not at about we the fine the now six months really of that have No, And put us. budget year. in

have some what's we better know to place, actual We expect, what coming in. in

second out it XXXX. just of XXXX, to Some to – the push the is of beginning

XXXX going or cash the just in it fall. going It is XXXX no of when out but pay Some to our is fall changes in to line.

Amanda Scarnati

Great. Thank you.

Operator

from of Silver the line David is from CLK. question Next

Your line open. is now

David Silver

good or Hi, Yes. good afternoon. morning

maybe experience, maybe in on your you scan, your how scores Sorry, was I their maybe with And Thank in the guess, increased that into line, improvement survey? existing maybe research credit Mike in I to or base? number a translate the further, But the customer surveys. times you your for or of in focus I improvements, could broadest reports to mentioned the talk VLSI satisfaction that new customer like in customer either step just company I'd one it would scores then acquisition does interesting. business I one but very survey the kind the of group that was think across equipment customer satisfaction thought semi take and broad-based you. process mainly high your achieved particular, score category, just And a you in which results the board your overall year about increased strategies that ago, versus

Mike Slessor

an interesting It's point. Yes.

We customers of of scores. good did satisfaction are is in a proud poll a we of and year's showing customer VLSI ranking survey, which key and – higher are make this raw a our higher all

We're driving and our couple customer our think those very to leaders be as forward see our are want very the support Some of the you the XX% and far years, roadmap customer what's technical are trying from to customers, If with the leadership and recall, stated their industry, we interesting. in biggest in I close of scored in last be validation quarter the strategy. by high and interesting of details spend to deploying I the customers, the over R&D in those both second roadmap partnered space. and points

from So and problems it. then competitive their I'm solving generating advantage

They're market and of you. a think If driver answer reflection maybe that being probably order not those not the I market I ends it than from happy with share, to being the customers share. going all think are up survey rather of you. a customers

differentiated but having of I satisfaction our share and executed history is to products, I and hand-in-hand, to. And strong to also the so both central compelling having the think market two that we've go gains customer think central strategy

David Silver

then Okay, and question one time. of maybe just period kind longer last perspective great. a And of maybe over this is

of just your an by logic So et only versus when cards for flash, mean, there dynamics your things cetera. want or revenues to other literally the yourselves where at it element and there's I of development the memory the industry. over customers the DRAM on a a on where And in hand probe of you and know, foundry breakdown period have I share don't that look can is track versus you. the foundry in let's profit for. you you between, longer them and guess, on wondering words, think sell with breakdown cycles. I'm over the or just development the normalized, period of longer Do track, lines. are Thank a other individual desire kind sustainable I the product categories I cycles I case hand, customers competitive and there say different competitive one But the time, product align logic In the you the other – time.

Mike Slessor

over share up had back long some a customers back years, up were position. really FormFactor you not the XX% customers really have the if we the I second where two significant we Well, XX If of didn't Yes. very in timeframe, customers. quarter market

part – make I strong working the share consistent industry. talked market leaders the very in so combined again, at positions to of the strategy And we and with hard about we're sure this, have all

the do all good share leaders with And as the industry cycles, to that. they and regardless a want those fabless with long where have strong we We position that's in large to. in sure we to in we're run. decided SAT to of them, what foundry so long make scores regardless as we'll neutral go okay customers, of customer think have market And essentially the development

David Silver

Okay. you Thank Appreciate much. it. very

Mike Slessor

Thanks.

Operator

No turn back time. Mike this at call questions Mr. Slessor. over the I further to

Mike Slessor

half, joining of see you much very for some Thanks to and person. conferences All you maybe in hope right. see us in the investor again Take today. the at second even care. And we

Operator

sorry. I'm

We next from & Shi have question our Company. Needham Charles from

is open. Your line now

Charles Shi

apologies, my thanks me for squeezing Really in.

might DRAM, I on have but to just you Mike, comment get this. I So question this, to really alluded clear really a think around want a

that of strength of going out DRAM QX driven half the your bit a a the by is customer your question. sort by year, is first broadening little is your because possibly second understanding primarily your seeing QX my So into terms my this in part of are one you that last DRAM of customers. demand – That's the Thanks.

Mike Slessor

correct. that's Yes,

unusual we've is different quarters. historically, that in have not seen our be each Although – customers different DRAM intensities

of key share leaders Again, in their the one so And the able matter back customers. we're be it's with that And our able for sure factories and run reasons quarter. That's forward. supplier market at to be a to strategy. the be not in unusual is subsequent one of to then big no it's them another make very one why industry, customer a all edge high a strong given DRAM important of strong to on be that the to to winning which so of one manufacturers we're these utilization leading go the

given in see to customer concentration any unusual quarter. not So

Charles Shi

you. Thank my Thank once the you, minute. in Mike, question the again, apologies at for squeezing last

Mike Slessor

problem. No

Mike Slessor

Operator?

Operator

conference call. you, Thank sir. today's This concludes

may You disconnect. now

FormFactor (FORM) 29 Jul 212021 Q2 Earnings call transcript